New figures show slowest rate of borrowing growth in a year-and-a-half, while bank deposits shrank for the first time in three years

By David Hargreaves

The Reserve Bank’s likely to be happy that its monthly sector credit figures for January show the slowest rate of borrowing growth in a year and a half.

Separately, however, the big banks are unlikely to be thrilled with household deposits figures showing a monthly drop in Kiwis’ bank deposits for the first time in three years.

The banks have been battling to attract deposit funds in the face of very low interest rates and have been needing to go offshore for more funding in order to keep up with borrowing demand.

This has led to a higher cost of funds for the banks – and to mortgage interest rates being pushed up, even though the official rates set by the RBNZ have been falling and are set to remain at current levels for some time.

It is not unusual for the overall level of deposits held by Kiwis to drop over Christmas, but this is the first time such a drop has occurred since January 2014.

Moreover, the $336 million fall in deposits, to $162.302 billion, has seen the annual rate of deposit growth slip to 6.8%.

After dipping as low as 6.7% in September, the annual growth rate blipped back up to 7.5% in November on the back of a couple of months of strong growth.

However, the latest month has seen the annual growth rate dip back toward levels last seen some six years ago as the country was recovering from the Global Financial Crisis.

Of some relief to the banks though will be the fact that the demand for borrowing is easing back, following the RBNZ’s October introduction of 40% deposit rules for housing investors.

The banks have been starting to undertake credit ‘rationing’ in the face of the weaker stream of deposits coming in.

The slower rate of borrowing has been led by the investors, as separate RBNZ figures show.

The total household claims figure, which is mostly made up of mortgages, but also includes consumer finance, rose by a seasonally adjusted 0.5% in January.

That’s the slowest rate of growth since June 2015. The monthly growth in household credit has been as high as 0.8% since then and was 0.7% in December.

The total rose by nearly $1.3 billion to $248.163 billion.

It’s worth noting though that even with this slower growth, combined with the fall in deposits, it means the gap between what the banks took in during January and what they loaned out was over $1.5 billion.

Just in terms of straight mortgages, the total rose to $232.068 million in January from $230.779 in December.

This is the last time the RBNZ will be producing these borrowing and deposits figures in this form, with a new series of statistics set to make their debut in April.